where orders emerge

Economics vs. Engineering

Francis Spufford at Redplenty.com (a site devoted to his novel on Soviet planning) has a page of Soviet jokes. Here is one I found particularly interesting:

Yuri Gagarin’s daughter answers the phone. ‘No, mummy and daddy are out,’ she says. ‘Daddy’s orbiting the earth, and he’ll be back tonight at 7 o’clock. But mummy’s gone shopping for groceries, so who knows when she’ll be home.’

This conveys a deep truth. Getting an astronaut (Yuri Gagarin) into orbit and back to earth is an engineering problem. Human beings have figured out a way to do that that is generally predictable based on a set of mathematical equations that are testable and where the results are replicable. They are a form of applied physics or engineering. They are a problem (how do we get Yuri Gagarin back from space) that has a fairly well-specified solution. Of course that solution did not exist in 1850. But by 1961, it was solvable.

Running an economy is not an engineering problem. There are no simple equations that describe its motion that are akin to the engineering problem of space travel. So Ms. Gagarin’s return is uncertain. The joke is a statement about Soviet planning that resulted in frequent shortages and long lines of presumably uncertain length. Sometimes items were in stock, sometimes they weren’t.

Ironically, in an unplanned economy, shopping is usually as straightforward and predicable as space travel. It becomes a engineering problem–what is the shortest route to the grocery–what is my optimal path through the store given my shopping list.

Too many economists treat the economy as a system akin to a machine when in fact it is more like an unpredictable ecosystem. But even an ecosystem has certain regularities. It when we imagine we can control that ecosystem in the way we control and steer a machine that we get into trouble.